Anti-money laundering legal framework is increasingly becoming principles based, rather than prescriptive. Principles based legislation provides broad obligations that must be met, but leaves the methods of meeting those obligations up to the individual. This is known as the Risk Based Approach.

This approach is based on the assumption that businesses are best placed to know their customers, products, operating structure and business environment. As a result, businesses are also best placed to assess the risks of their business being used for money laundering or terrorism financing purposes. One such area requiring a risk based approach is Ongoing Customer Due Diligence.

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Ongoing Customer Due Diligence (OCDD) is a key element of your business' control framework in identifying, mitigating and managing money laundering and terrorism financing risks. OCDD obligations apply in relation to all customers who are required to be identified and verified. OCDD includes transaction monitoring. For medium to large size businesses, automated transaction monitoring is the best solution for this regulatory requirement. Without automated monitoring, the task becomes mammoth and unreliable.

OCDD obligations also include keeping customer information up-to-date. The purpose of reviewing your customer's information is to reassess their risk rating. During the review process you will want to know whether your customer's business has changed in either activity and / or expansion? Has your customer been subjected to adverse media? Is your customer now a Politically Exposed Person? Is your customer now domiciled in a different jurisdiction or has their business operations gone offshore?

Customers classified as High Risk should have their customer information reviewed at least annually. Business databases should have the ability to provide reports of High risk customers, including offshore customers and Politically Exposed Persons (PEPs). Not only will this data assist the ongoing management of AML / CTF programmes but it is also the type of key information your regulatory supervisor will expect you to provide and have readily available.